The crisis has been worsened by political stalemate between President Robert Mugabe and his rival Morgan Tsvangirai, but the opposition last week agreed to join a coalition government, raising prospects the economy could be saved from further ruin.
The southern African country is battling the world’s highest inflation rate, officially put at 231 million percent, and acute shortages of food and foreign exchange.
Reserve Bank of Zimbabwe Governor Gideon Gono announced the new currency moves on Monday, adding that some foreign exchange controls will be relaxed and gold producers now can sell bullion directly and not to the central bank as in the past.
“This Monetary Policy Statement unveils yet another necessary program of revaluing our local currency, through the removal of 12 zeroes, with immediate effect,” Gono said in his MPC statement.
Late last month the country allowed businesses to charge in foreign currencies in a bid to tackle inflation and Gono said those businesses could pay their workers in foreign currency.
The country’s stock exchange, which has not traded for two months, would also be licensed to trade in foreign currency once listed firms and the exchange provide evaluation criteria.
Gono gave no updated inflation figures but said broad money supply growth rose from 81,000 percent in January to 658 billion percent in December.
“His statement does contain some positive measures but it does not go far enough. It would appear he is trying to restore the Zimbabwean dollar, but given the choice of multiple currencies, who would want to trade in Zimbabwe dollars?” John Robertson, a leading Harare-based economist said.
Tsvangirai, who had been under heavy pressure from southern African leaders to implement a September 15 power-sharing pact with Mugabe, is now set to become prime minister.
The unity government may be a step toward saving a once prosperous country where over half of the people now need food aid and a cholera epidemic has killed 3,229 people and infected 62,909 others — Africa’s deadliest outbreak in 15 years.
Gono said production in every major economic sector had taken a plunge.
Output of gold, the country’s single major foreign currency earner, plunged by 50 percent in 2008 as companies grappled with rising costs and electricity shortages.-Reuters